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Property and Casualty Insurance Producer Exam

Policies and cancellation (TX): practice questions

Our Property & Casualty Insurance bank has 7 questions on this topic. Here are 5 of them with answers; the full mock exam draws from every topic, like the real one.

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Question 1 · Texas

In Texas, a total fire loss of insured real property is treated as:

  1. A claim for actual cash value only
  2. A liquidated demand for the full policy amount
  3. A claim for replacement cost less depreciation
  4. A matter for appraisal
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B. A liquidated demand for the full policy amount — Tex. Ins. Code 862.053(a): in case of a total loss by fire of insured property, the policy is a liquidated demand for its full amount (not personal property).

Question 2 · Texas

Which ground lets a Texas insurer cancel any policy?

  1. The insured filed one hail claim during the policy term
  2. The insured turned 70
  3. The insured's agent retired
  4. The insured submitted a fraudulent claim
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D. The insured submitted a fraudulent claim — Tex. Ins. Code 551.104(b)(2): any policy may be cancelled if the insured submits a fraudulent claim (also nonpayment, or a violation of law).

Question 3 · Texas

If a Texas insurer fails to send a nonrenewal notice at least 60 days before a personal auto or homeowners policy expires, it must:

  1. Cancel the policy immediately
  2. Refund a year's premium
  3. Ask TDI for permission to nonrenew after the deadline has passed
  4. Renew the policy at the insured's request
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D. Renew the policy at the insured's request — Tex. Ins. Code 551.105: unless written notice of nonrenewal is mailed by the 60th day before expiration, the insurer must renew at the insured's request.

Question 4 · Texas

A Texas insurer may cancel a policy other than personal auto when the insured increases the covered hazard in a way that:

  1. Is within the insured's control and would raise the premium rate
  2. Is caused by a neighbor's activities next to the insured property
  3. Results from the weather
  4. Lowers the premium
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A. Is within the insured's control and would raise the premium rate — Tex. Ins. Code 551.104(c): an increase in the hazard within the insured's control that would produce an increase in the premium rate.

Question 5 · Texas

Earned premium for coverage that runs past a Texas commercial policy's expiration because of late nonrenewal notice is figured:

  1. Short rate
  2. Pro rata on the previous year's rate
  3. At double the rate
  4. At no charge
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B. Pro rata on the previous year's rate — Tex. Ins. Code 551.054(c): earned premium for coverage beyond expiration is computed pro rata based on the previous year's rate.

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